‘Other costs’

/ 04:09 AM January 13, 2020

In a presentation last week at the 4th Philippine Construction Industry Congress, local think tank Reid Foundation gave a breakdown of the expenses that construction firms spend on average in putting up new infrastructure for both the public and the private sectors.

Aside from the usual expenses for raw materials and labor, an item tagged “other costs of doing business” was highlighted. The tag may sound innocuous, but those “other costs” are anything but, since they are said to take 15 to 35 percent of the expenses.


What are these “other costs”? They are the company’s budget for corruption, to grease the wheels of government bureaucracy. Construction companies are forced to spend as much as 35 percent of their budgets for projects to bribe government personnel and prevent them from delaying their projects, which may be as small as an ordinary house or as huge as condominiums, or even state-sponsored infrastructure undertakings like bridges and airports.

Companies may be adamantly against participating in this practice, but many are left with no choice but to play along, in an abusive cycle that has been going on for ages. Pay or face bigger expenses for delays.


The damage wrought by corruption on society and business is many-layered, but in the infrastructure business, an immediate ill effect is the risk inflicted on Filipino consumers.

In some cases, companies end up compromising other parts of the construction — such as the quality of raw materials — in order to accommodate the additional cost of paying off crooked public employees and officials.

As Ronilo Balbieran, Reid Foundation vice president for operations, pointed out, “this is the problem that we want to address but nobody wants to talk about.” Reid interviewed various stakeholders in the construction industry from October 2018 to March last year to make sure the figures cited in the presentation were as current as possible.

Part of the government’s efforts to address this problem is the activation of the Anti-Red Tape Authority (Arta), which saw the appointment of its first director general in July last year. The formation of Arta, the agency tasked to implement the new ease of doing business law, got delayed for more than a year because Malacañang did not immediately appoint someone to run it.

The law, among other provisions, will impose a zero-contact policy, including in local governments, once an online business registration system has been put in place. The policy bars government workers from having any contact with applicants — a setup that will hopefully lessen the prospects of under-the-table transactions and other forms of corruption.

Indeed, modernizing processes and instituting greater transparency with the help of technology will help the national government address corruption at all levels of public service. Going digital — making the application process for building permits and other requirements for construction projects available online, for instance, via the internet — is one way to minimize corruption. With zero opportunity for a government employee to interact with a contractor, the chance for extortion on the part of the employee, or bribery on the part of the contractor, is removed.

Ridding the government of corrupt officials has been one of President Duterte’s promises since taking office in 2016. In his State of the Nation Address in 2018, he said corruption was like a “leech” that “bleeds the government of funds programmed for its infrastructure and other social development projects,” and vowed to “run after those who steal the people’s money.”


The year before, he warned that he would “never tolerate corruption in my administration, not even a whiff of it” and that he would “never back down on my commitment to cleanse this government of corruption.”

Zeroing in on the open secret that plagues the construction industry should thus be a priority project of this administration. A serious and sustained effort to root out dishonest government dealings is required, considering how rampant, widespread and entrenched the practice has become, involving nearly everyone in the bureaucracy from the lowliest barangay officials all the way to municipal and city executives.

The construction sector needs to be free of the additional cost of corruption not only to avoid delays, but, more critically, to keep people safe and free from substandard buildings and public infrastructure.

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TAGS: construction companies, construction costs, construction industry bribes, editorial
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